November 12, 2015

The U.S. Department of Housing and Urban Development (HUD) has released a proposed rule that aims to "formalize standards for use in investigations and adjudications involving alleged harassment on the basis of race, color, religion, national origin, sex, familial status or disability under the Fair Housing Act (FHA)."

The proposal, announced on October 21, 2015, also contains a proposed expansion of vicarious liability for occurrences such as tenant-on-tenant harassment, a proposed change with significant implications for the housing industry.

HUD's proposed rule seeks to create standards for protected characteristics that are distinct from the employment discrimination context under Title VII, and that are more suitable for assessing claims relating to the FHA. To do so, HUD proposes establishment of causes of action for "quid pro quo harassment" and "hostile environment harassment.”

"Quid pro quo harassment" is defined to occur when a person "is subjected to an unwelcome request or demand because of that person's protected characteristic and submission to the request or demand is, either explicitly or implicitly, made a condition related to the person's housing." Such quid pro quo harassment can come by e-mail, text messages, social media, taunting or teasing, or threatening statements.

“Hostile environment harassment” is defined to occur when a person, because of a protected characteristic, is "subjected to unwelcome conduct that is sufficiently severe or pervasive such that it interferes with or deprives the victim of his or her right[s]" under the FHA. To determine whether a hostile environment has been created, there must be an assessment of the totality of the circumstances, which includes the "nature of the conduct; the context in which the conduct occurred; the severity, scope, frequency, duration, and location of the incident(s); and the relationships of the persons involved."

Critically, the proposed rule also contains a provision that seeks to clarify the liability standards in the fair housing context. This would apply to the entire FHA, not just harassment. Specifically, the proposed rule outlines direct liability for a principal’s own misconduct but also would establish vicarious liability for the actions of a principal's agents, regardless of whether the principal knew of the misconduct. Rather remarkably, a principal is directly liable under the proposed rule where, for example, an apartment owner "should have known of tenant harassment by another tenant." A principal “should have known” about illegal discrimination when the principal is found to “have had knowledge from which a reasonable person would conclude that the agent was discriminating.”

Given that these new liability standards would apply to all FHA claims, if implemented as proposed by HUD, this proposed expansion of liability would have significant ramifications and exposure for many in the housing industry and require added diligence, particularly where agents and those constituting an agency relationship are involved, and where complaints from other tenants may suggest the existence of potential FHA violations. Under this proposal, harassment by one tenant of another tenant could give rise to liability, even if the harassment has nothing to do with the terms of tenancy and irrespective of whether the conduct occurs on the owner’s premises.

For example, in all likelihood, an apartment owner that has a social media page or online message board would have to proactively monitor those for possible harassing comments or statements that would constitute a violation of the FHA, and then take appropriate action.

HUD is accepting public comments until December 21, 2015.

If you have questions about or would like to discuss the proposed notice, please contact Amy M. Glassman at 202.661.7680 or glassmana@ballardspahr.com.

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